Risk off flow into Friday

GBPUSD – technical overview

Signs have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September. A break above the September high at 1.1739 will solidify the recovery. Until then, look for setbacks to be well supported ahead of 1.0800.

• R2 1.1496– 5 October high – Strong
• R1 1.1440 – 17 October high – Medium
• S1 1.1058 – 13 October low – Medium
• S2 1.0924 – 12 October low – Medium

GBPUSD – fundamental overview

The Pound has held up relatively well in the face of the news around the resignation of Liz Truss. The market had done a good job pricing the event in, which accounts for the lackluster reaction. The UK will get a new PM next Friday, and the new budget is still scheduled for October 31. Key standouts on today’s calendar come from UK retail sales, Canada retail sales, Eurozone consumer confidence, and a Fed Williams speech.

USDJPY – technical overview

Technical studies are looking quite stretched on the longer-term chart, warning of consolidation and correction in the days and weeks ahead. Look for additional upside from here to be well capped on rallies above 150.00. Next key support comes in at 148.12.

• R2 151.00 – Psychological – Strong
• R1 150.43 – 21 October/2022 high – Medium
• S1 148.12– 18 October low – Medium
• S2 145.90 –22 September high – Strong

USDJPY – fundamental overview

The Yen has extended declines to fresh multi-year low levels, sinking below pre-intervention levels from September to its lowest levels since 1990. Policy divergence continues to be a big deal here, with yields moving more and more in the US Dollar's favour. Japanese holdings of US Treasuries are now at three-year low, reflecting moves to sell bonds for currency intervention. Key standouts on today’s calendar come from UK retail sales, Canada retail sales, Eurozone consumer confidence, and a Fed Williams speech.

AUDUSD – technical overview

Overall pressure remains on the downside with the market confined to a well defined downtrend. A break back above 0.6682 would be required to take the pressure off the downside. Until then, scope exists for deeper setbacks towards 0.6000.

• R1 0.6433 – 7 October high – Medium
• R2 0.6348 –14 October high – Medium
• S1 0.6170 –13 October/2022 low – Medium
• S2 0.6100 – Figure – Strong

AUDUSD – fundamental overview

A weak Aussie jobs report earlier this week, combined with renewed risk off flow have been what have weighed on the Australian Dollar in recent sessions. We did however see some Aussie support on the China quarantine news. Key standouts on today’s calendar come from UK retail sales, Canada retail sales, Eurozone consumer confidence, and a Fed Williams speech.

USDCAD – technical overview

A recent surge back above 1.3000 signals an end to a period of bearish consolidation and suggests the market is in the process of carving out a more significant longer-term base. Next key resistance now comes in up into the 1.4000 area. Setbacks should be very well supported down into the 1.3000 area.

• R2 1.4000 – Psychological – Strong
• R1 1.3978 – 13 October/2022 high – Strong
• S1 1.3600 – Figure – Medium
• S2 1.3503 – 4 October low – Strong

USDCAD – fundamental overview

Even though traders are betting on a 75 basis point rate hike from the Bank of Canada next week, the Loonie hasn't been able to do much at all this week, trading just off recent yearly and multi-month lows against the US Dollar. Worry around the Canada housing market outlook and the downturn in global sentiment have been driving most of the price action. Key standouts on today’s calendar come from UK retail sales, Canada retail sales, Eurozone consumer confidence, and a Fed Williams speech.

NZDUSD – technical overview

Overall pressure remains on the downside with the focus on a retest of the critical low from 2020 at 0.5469. A break back above 0.5814 would be required to take the immediate pressure off the downside.

• R2 0.5814 – 6 October high – Strong
• R1 0.5720 – 19 October high – Medium
• S1 0.5512– 13 October/2022 low – Medium
• S2 0.5500 – Psychological – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has come back under some pressure on another downturn in sentiment, but has managed to outperform the Australian Dollar after New Zealand inflation readings came in well above forecast earlier this week, fueling speculation the RBNZ would be more hawkish. Key standouts on today’s calendar come from UK retail sales, Canada retail sales, Eurozone consumer confidence, and a Fed Williams speech.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. Back above 3808 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3200.

• R2 3922 – 20 September high – Medium
• R1 3808 – 5 October high – Strong
• S1 3492 – 13 October/2022 low – Medium
• S2 3400 – Round Number – Medium

US SPX 500 – fundamental overview

We've finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. Overall, we expect inflation to continue to be a problem in 2022 that results in downside pressure into rallies.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1600 on a monthly close basis ahead of the next major upside extension.

• R2 1766 – 25 August high – Strong
• R1 1736 – 12 September high – Medium
• S1 1615 – 28 September/2022 low – Medium
• S2 1600 – Round Number – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about inflation risk and a less upbeat global growth outlook. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax. [audio mp3="https://www.lmax.com/blog/wp-content/uploads/sites/4/2022/10/21octlmaxaudio.mp3"][/audio]